European Commission consultation on extending PRIIPs transitional arrangements

The European Commission launched a consultation (closing 9 September 2021) on the proposal for a Regulation amending the Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation.

A key element of the proposal is the extension of the temporary exemption from the requirement to provide retail investors with a Key Information Document (KID) under the PRIIPs Regulation. This exemption applies to management companies, investment companies and persons advising on or selling UCITS and non-UCITS.

The European Commission has opened an eight week consultation on its quick fix proposal for PRIIPS that would extend the UCITS exemption by six months to 30 June 2022. We do not expect the PRIIPS RTS to be published until September following delays in the European Commission, which continues to keep pressure on for timely adoption and implementation of the revised rules.

Cross-border distribution of funds regime to come into effect on 2 August 2021

ESMA submitted its first report on national rules governing the marketing of investment funds under the Regulation on cross-border distribution of funds (CBDF). The report sets out the national rules governing the marketing of investment funds in each member state. It provides an overview of the marketing requirements across Member States, and analyses the effects of national laws, regulations and administrative provisions governing the marketing of investment funds. You can read more about CBDF here and listen to our latest podcast on the topic here.

Application of SFDR RTS delayed to 1 July 2022

The European Commission wrote to the European Parliament and Council regarding the long awaited regulatory technical standards (RTS) under the Sustainable Finance Disclosure Regulation (SFDR). The European Commission plans to:

  • defer the date of application of the SFDR RTS by six months from 1 January 2022 to 1 July 2022
  • bundle all 13 of the SFDR RTS into a single Delegated Act

The delay is due to the length and technical detail of the RTS and should facilitate the smooth implementation of the single Delegated Act. This will come as a welcome relief to industry who first updated disclosures to comply with SFDR by 10 March 2021 and who will be obliged to further update the SFDR disclosures to comply with the more specific disclosure requirements which will be set out in the single Delegated Act.

You can read more about SFDR here.

European Commission Q&A on SFDR

The European Commission issued a Q&A on sustainability-related disclosures. This was in response to questions that the ESAs forwarded to the Commission on SFDR. The Q&A responds to questions including:

  • the application of SFDR to registered (sometimes referred to as sub-threshold) AIFMs
  • the application of SFDR to non-EU AIFMs, for example when they market a sustainable EU AIF under a NPPR
  • the application of the 500-employee threshold for EU and non-EU entities for principal adverse reporting
  • article 9 SFDR
  • article 8 SFDR
  • whether a product must track an EU Climate Transition Benchmark (EU CTB) or EU Paris-aligned Benchmark (EU PAB) where it exists
  • SFDR website disclosure obligations for segregated accounts or other non-pooled financial products managed on a discretionary basis.

Renewed Sustainable Finance Strategy, European Green Bond Standard and the Delegated Act for Article 8 of the Taxonomy Regulation.

The European Commission also published the Renewed Sustainable Finance Strategy, a proposal for a European Green Bond Standard and the Delegated Act for Article 8 of the Taxonomy Regulation.

The European Commission's Renewed Sustainable Finance Strategy includes six sets of actions:

  • extend the existing sustainable finance toolbox to facilitate access to transition finance
  • improve the inclusiveness of small and medium-sized enterprises, and consumers, by giving them the right tools and incentives to access transition finance
  • enhance the resilience of the economic and financial system to sustainability risks
  • increase the contribution of the financial sector to sustainability
  • ensure the integrity of the EU financial system and monitor its orderly transition to sustainability
  • develop international sustainable finance initiatives and standards, and support EU partner countries

The European Commission will report on the strategy's implementation by the end of 2023 and will actively support Member States in their efforts on sustainable finance.

As part of its updated strategy the European Commission proposed a Regulation on a voluntary European Green Bond Standard (EUGBS). This proposal will create a high-quality voluntary standard available to all issuers (private and sovereigns) to help financing sustainable investments. Green bonds are already used to raise financing in sectors such as energy production and distribution, resource-efficient housing, and low-carbon transport infrastructure. The core objective is to create a new ‘gold standard' for green bonds that other market standards can be compared to, and potentially seek alignment. This standard will aim to address concerns on greenwashing and protecting market integrity to ensure that legitimate environmental projects are financed.

The European Commission adopted the Delegated Act supplementing Article 8 of the Taxonomy Regulation, which requires financial and non-financial companies to provide information to investors about the environmental performance of their assets and economic activities. The Delegated Act specifies the content, methodology and presentation of information to be disclosed by large financial and non-financial companies on the share of their business, investments or lending activities that are aligned with the EU Taxonomy. The Act applies fully to non-financial undertakings as of 1 January 2023 for the reporting period 2022 and to financial undertakings as of 1 January 2024 for the reporting period 2023.

UCITS & AIFMD Q&As updated for performance fee issues

ESMA has added two new Q&As in respect of its guidelines on performance fees in UCITS and certain types of AIFs. The Q&As provide clarification on the application of the guidelines to funds with multiple portfolio managers and the crystallisation of performance fees.

ESMA Q&As – ESMA published its list of questions currently under development

ESMA published its list of questions currently under development. These include questions on:

  • risk diversification
  • secondments
  • MMFR
  • guidelines on performance fees in UCITS and certain types of AIFs
  • fee rebate arrangements in UCITS

ESMA reports on use of sanctions for UCITS and under AIFMD

ESMA published its fourth annual report on use of sanctions for UCITS. Overall, 13 NCAs imposed a total of 57 penalties; the total aggregated value of financial penalties imposed amounted to around €1,100,986. 11 NCAs imposed a total of 43 measures. 13 NCAs (including Ireland) did not impose any sanction (penalty or measure) during the reference period.

ESMA published its second report on sanctions under AIFMD. Overall, 11 NCAs imposed a total of 61 penalties; the total aggregated value of financial penalties imposed amounted to around €3,354,407. 12 NCAs imposed a total of 70 measures. 13 NCAs (including Ireland) did not impose any sanction (penalty or measure) during this reference period.

MMFs/ UCITS/ AIFs may be in scope of RTS setting criteria for shadow banking entities

The European Banking Authority (EBA) is holding a consultation (closing 26 October 2021) on draft regulatory technical standards (RTS) setting criteria for the identification of shadow banking entities for the purposes of reporting large exposures. The RTS specifically consider the assessment of UCITS/ AIFs. MMFs are identified as shadow banking entities.

The draft RTS also consider the position of entities established in third countries and provide for a treatment that distinguishes between banks and other entities.

A public hearing will take place via conference call on 29 September 2021 from 100:00 to 12:00 CEST.


Following the launch of the EU AML/ CFT action plan in May 2021 (discussed here), the European Commission published its AML legislative package. This consists of four legislative proposals:

  • A Regulation establishing a new EU AML/CFT Authority (AMLA) which will:
    • establish a single integrated supervision system across the EU
    • directly supervise some of the riskiest financial institutions
    • monitor and coordinate national supervisors
    • work with and support cooperation among national Financial Intelligence Units

The Commission has called for AMLA to be operational in 2024, and to begin direct supervision once the Directive has been transposed and the new regulatory framework starts to apply.

On third countries, the press release notes that:

  • A country that is listed by FATF will also be listed by the EU.
  • There will be two EU lists, a “black-list” and a “grey-list, reflecting the FATF listing. Following the listing, the EU will apply measures proportionate to the risks posed by the country. The EU will also be able to list countries which are not listed by FATF, but which pose a threat to the EU's financial system based on an autonomous assessment.

The translations of EBA revised ML/TF risk factors guidelines were published on 7 July in March 2021. They will apply from 7 October 2021.

The EBA will shortly consult on new guidelines on the role, tasks and responsibilities of AML/CFT compliance officers. The guidelines will also include provisions on the role of the member of the management board, or the senior manager where no management board exists, in charge of AML/CFT overall, and on the role of group AML/CFT compliance officers. Once adopted, these guidelines will apply to all financial sector operators that are within the scope of the AMLD.